In order to undertake special measures amidst the viral outbreak, the Ministry of Corporate Affairs (hereinafter referred to as ‘MCA’) on March 24, 2020 has issued a general circular under Companies Act, 2013 and Limited Liability Partnership Act, 20018. The aforesaid circular focuses on taking necessary measures to address the threat imposed by the novel coronavirus outbreak which includes the economic disruptions caused by it.
Measures issued by MCA to reduce compliance burden of Companies
- As per the Circular, no additional fees shall be charged for late filing during a moratorium period from April 01, 2020 to September 30, 2020, in respect of any document which is required to be filed with the Registry, irrespective of its due date. This measure will not only reduce the compliance burden for existing companies but will also enable long-standing noncompliant companies/ Limited Liability Partnerships (hereinafter referred to as ‘LLP’) to make a fresh start.
- The mandatory time interval for holding Board Meetings i.e. 120 days has been extended by a period of 60 days till next two quarters i.e., till 30th September.
- The Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of being applicable from the financial year 2019-2020 notified earlier. This measure is expected to ease the burden on companies significantly & their auditors for the financial year 2019-20.
- As per the existing compliance, Independent Directors (hereinafter referred to as ‘lDs’) are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the financial year 2019-20, if the lDs of a company have not been able to hold such a meeting, the same shall not be viewed as a violation.
- The compliance to create the deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
- Also, the compliance to invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020, may be complied with till 30th June 2020.
- For newly incorporated companies, additional period of 180 more days is allowed to file the declaration for Commencement of Business which was previously to be filed within 180 days of incorporation.
- The minimum residency requirement for a period of at least 182 days by at least one director of every company has now been waived off for the financial year 2019-2020.
The above measures issued by Ministry of corporate Affairs are expected to bring much required relief for the Companies and LLPs during this time of distress. The extension of deadlines and waivers has now been allowed for most of the compliances and it is believed that the said measures would ensure smooth functioning of the companies and LLPs.